Nainesh Sanghvi vs Rajesh Jhunjhunwala & Ors.

[Per: Mr. Prasanta Kumar Mohanty, Member(T)]

The present Interlocutory Application IA 432 of 2019 is filed under section 60(5) of the IBC, 2016 (hereinafter referred to as “IB Code) by the Applicant being a Contributory and Managing Director of the Suspended Board of Directors of the Corporate Debtor, M/s. Siddartha Tubes Ltd., presently under CIRP, for appropriate directions to the RP against admission of claims of the non-applicants and not to include their names as Financial Creditors of the Corporate Debtor.

This Tribunal, vide orders dated 24.01.2018, in CP(IB) 67 of 2018, has admitted the petition filed by the Madhya Pradesh State Industrial Development Corporation Ltd., (MPSIDCL) against the Corporate Debtor and declared moratorium under Section 13(1)(a) and appointed Mr. Amresh Shukla as the IRP.

It is submitted that Respondent no.2, ARCIL also filed an application under Section 7 of the IB Code against the Corporate Debtor being CP(IB) 49 of 2018, which was disposed by this Tribunal vide order dated 27.02.2019 with liberty to the Respondent no.2 ARCIL to file its claim before the IRP with the directions to IRP to consider the claim of the Respondent no.2 as per law.

It is submitted that the IRP effected a public announcement as directed by this Tribunal and called for the claims from the creditors of the Corporate Debtor and subsequently filed a report containing the list of claims received and accepted under Regulation 13(3)(d) of the IBBI Regulations, 2016, wherein the IRP has reported that the claim of the Respondent no.2 has been rejected for the reason that the Assignment Agreement has not been sufficiently stamped as required by the MP Stamp Act and is considered as unregistered under the Registration Act However, on the similar grounds of non-payment of requisite Stamp Duty and unregistered Assignment Deed, debt of Dena Bank to the tune of Rs.207.54 Crores, the claims of the Respondent no.3, Assets Care & Reconstruction Enterprises Ltd.,(ACRE) has been partially accepted and notionally put at Re.1, which is evident from the report dated 21.02.2019 filed by the IRP.

It is further submitted that on 28.02.2019, first meeting of the CoC was held, wherein only two FCs were admitted as members of CoC being Respondent no.3 and MPSIDCL. Thereafter, on 14.03.2019 second meeting of CoC was held, wherein the claims of the Respondent no.2, ARCIL was accepted by the IRP at a notional value of Re.1 and partly rejected claim of Respondent no.3, ACRE has also been kept at Re.1, subject to the submission of proof of payment of requisite stamp duty and registration of the respective Assignment Deeds of the Respondent no.2 & 3. It is submitted that the IRP has filed a detailed report dated 18.032019 to this effect in compliance of Section 21(1) of the IB Code before this Tribunal.

Thereafter, the IRP called for a review meeting of CoC on 19.03.2019 in continuation of the second meeting dated 14.03.2019, wherein the IRP rejected the claims of the Respondent no.2 in total and partial claim of Respondent no.3 on the grounds of non-payment of requisite stamp duties on their respective deeds of assignments as enunciated by this Tribunal vide orders dated 08.03.2019 in the matter of Essar Steels Ltd. in IA 482 & 483 of 2018 in CP(IB) 39 & 40 of 2017. It is also brought to the notice of this Tribunal that in the second CoC meeting dated 14.03.2019, the appointment of RP has been confirmed by the Respondent no.2 & 3. Further, the Respondent no.2 & 3 filed various applications for seeking various reliefs before this Tribunal and vide orders dated 12.06.2019, in IA 163 of 2019 & IA 201 of 2019 in CP(IB) 67 of 2018, the appointment of Respondent no.1 was confirmed as RP and the Respondent no.2 & 3 were directed to lodge their claims afresh before the RP. It is submitted that the Applicant being in the fiduciary position to assist the CoC and RP had filed its objections on 24.06.2019 on behalf of the suspended board of the Corporate Debtor with the RP, stating that the claims of the Respondent no.2 in total and part claim of Respondent no.3, should not be treated as Financial Creditors, as they have not legally acquired the debt, since Respondent no.3 has not paid the requisite stamp duty under the Indian Stamp Act, 1899 and also failed to register their respective Assignment Deeds under the Registration Act, 1908 through which they have acquired the debts as a Financial Creditor.

Therefore, the Applicant prays:

It is further submitted that on 25.09.2019, the RP sent a notice of CoC meeting to be held on 01.07.2019 at the address of the Respondent no.2, which was received by the Applicant through email, wherein the RP had attached the list of Financial Creditors forming part of CoC, wherein the name of Respondent no.2 has been stated. It is submitted that the RP has arbitrarily and haphazardly accepted the claims of the Respondent no.2 & 3, which is against the procedure of law and without considering his binding legal position. It is submitted that the insufficiently/unstamped assignment agreements cannot be looked into as evidence nor it can be treated as valid claims. Hence, the action of the RP by accepting the unlawful claims of the Respondent no.2 & 3 is liable to be quashed and the RP may be directed to reconstitute the CoC after examining the said assignment agreements in a lawful manner.

It is submitted that the RP has sent a Status Report dated 28.06.2019 through email dated 28.07.2019, wherein it is stated that the RP has accepted the claims of the Respondent no.2 & 3 resulting in change in the voting percentage share of the CoC completely with a note that "the claims of ARCIL and ACRE might change based on decision of the Adjudicating Authority as the matter is sub judice ipso loco".

It is submitted that the acceptance of claims of the Respondent no.2 & 3 in full and part, respectively, would encourage such malicious conduct of the Respondent no.2 & 3 wherein requisite stamp duty has yet not been paid.

It is observed that instant IA has been filed by the Contributory and Managing Director of the Corporate Debtor M/s. Siddartha Tubes Ltd., presently under CIRP, who is having no locus seeking directions to IRP once the CIRP process is started and IRP is appointed.

Section 17 of the Code, inter-alia, states,

Sub-section (2) goes on to state that the interim resolution professional, vested with the management of the corporate debtor, shall act and execute in the name and on behalf of the corporate debtor all deeds, receipts, and other documents and shall have the authority to access the electronic records, books of accounts, records and other relevant records of the corporate debtor.

Section 19 of the Code runs as under:

In Para 11 of the judgment delivered in Innoventive Industries Ltd v. ICICI Bank and Another [Civil Appeal Nos. 8337-8338 OF 2017][3], the Supreme Court says, "According to us, once an insolvency professional is appointed to manage the company, the erstwhile directors who are no longer in management, obviously cannot maintain an appeal on behalf of the company . . . Entrenched managements are no longer allowed to continue in management if they cannot pay their debts."

The Resolution Professional is hereby directed to perform the duties as enunciated in Section 25 of the IB Code.

Section 25(1) of Insolvency and Bankruptcy Code 2016:

Having gone through the IA filed by the Suspended Management of the Corporate Debtor and reliefs sought for in this IA that directions should be given to IRP/RP to reject the claims of some claimants etc. We, as Adjudicating Authority do not like to interfere with the commercial decision of the CoC for their classification of creditors whether someone is required to be treated as Operational Creditor or the Financial Creditor. Hence, we do not find any merit in this IA. The prayers sought for, are rejected. However, the RP is hereby directed to classify/update the claims of the creditors strictly in accordance with the IBC, 2016.

No order as to costs.

[Per: Mr. Harihar Prakash Chaturvedi, Member (J)]

I have been benefited to peruse the order of the Ld. Member (T), while disposing of the present IA. While agreeing to the operative portion of the order, the present application is liable to be rejected, since the applicant being a member of Suspended Management of the Corporate Debtor can have no vested right or locus standi to agitate/raise some objection for and on behalf of the corporate debtor company, because the management of the corporate debtor for the time being now been taken over by the RP, who is the only authorized representative of the Corporate Debtor to take care of its interest, in accordance with law.

Notwithstanding the above, I would express my view on a different footing that even though the present IA is not maintainable on the ground of the locus of the present applicant. Yet the issue agitated in such IA needs to be dealt with in accordance with law being relevant question of law and facts and cannot be overlooked by the RP on technical reason, because the RP is an appointee of this court. The Hon'ble Supreme Court in the matter of Swiss Ribbons Pvt. Ltd. &Anr. Vs. Union of India &Ors., has already ruled that the RP has been vested with no adjudicating power and his role is to collate the information and update the claim(s) of the parties concerned as per provisions of IBC to place it before the Committee of Creditors (CoC) for its consideration.

This Bench, in its earlier decision in the matter of Numetal Limited v/s. Satishkumar Gupta & Ors. IA no. 98 of 2108 in CP (IB) 40 OF 2017 decided on 19.04.2018 which came to be confirmed by the Hon'ble Supreme Court vide its landmark decision in the matter of Arcellor Mittal India Pvt. Ltd. vs. Satish Kumar Gupta has already held that the nature of duties of RP is like a duty of public servant and he has to act unbiasedly and in accordance with law and in conformity with the provisions of the I & B Code, for collating the information and updation of the claims of parties concerned.

It is pertinent to mention here that the certain objections are raised by the present applicant by alleging that certain claims based on insufficient stamp duty and in being contrary to the provisions of the Stamp Act and Indian Registration Act has been improperly admitted by the RP but such claims ought to have been disallowed by the RP for want of requisite stamp duty as per the relevant provisions of the Indian Stamp Act, Indian Registration Act read with Indian Evidence Act.

In view of the above stated objection raised, we therefore feel that the RP is legally expected to re look such issue and to examine such claim in the light of the previous decision of this bench in Hill View Hire Purchase Pvt Ltd V/s Satish Kumar Gupta (RP) IA No. 482 of 2018 and D R Patnaik V/s Satish Kumar Gupta (RP) IA No. 482 of 2018, which came to be passed by this Bench of NCLT along with in main IA, i.e. IA No. 431 of 2018 in CP (IB) No. 39 & 40 of 2017, (popularly known as Essar Steel matter) by approving the Resolution Plan. Where in we have already held that there can be found no irregularity in the decision of the RP if certain claims of the applicant(s) were not admittedly being found insufficiently stamped and for non-payment of requisite stamp duty.

For the sake of convenience, the relevant paragraphs of our above said order i.e paragraph-8 & 9, are being reproduced herein below:

It is also a matter of record that our above stated order passed in IA No.482 and 483 of 2018 has further been confirmed and approved by the Hon'ble NCLAT as well as by the Hon'ble Supreme Court in its decision in Committee of Creditors of Essar Steel Limited vs. Satish Kumar Gupta & Ors. Thus, the Hon'ble Supreme Court has pleased, to not interfere with concurrent findings given by the Hon'ble NCLAT and by this bench for rejection of claim of a party for want of payment of requisite stamp duty. Thus, Hon'ble Supreme Court, while confirming such findings in paragraph 99 of its decision (in the matter of Committee of Creditors of Essar Steel Limited vs. Satish Kumar Gupta & Ors.) has pleased to hold by observing and held as such :-

By following the above referred judicial precedents of Hon'ble Supreme Court, we feel appropriate to issue a direction to the RP to reconsider such objectionable claim as has been pointed out by the present applicant. In the light of above stated decision of the Hon'ble Supreme Court, the RP should do it in consultation with the Committee of Creditors. The RP thereafter may to collate information and update the claims in accordance with the provisions of the I & B Code and can act accordingly.

With the aforesaid observations, the present interlocutory application is disposed of accordingly.